Isabelle Oderberg

An interview with Michael Hudson via Business Spectator

On the eve of an Australian speaking tour, highly-regarded US economist Dr Michael Hudson, talks to Isabelle Oderberg about the economic recovery that isn’t, and tells her:

* The world is in the midst of a serious depression that’s continuing to spread
* A rise in Australian interest rates would result in a financial raid that would dramatically increase the tax burden on Australian taxpayers
* Bursting real estate bubbles and rampant debt deflation are driving economies around the world to the brink
* The Obama administration’s determination to rescue the financial sector amounts to the “assisted suicide” of the US economy

Isabelle Oderberg: Quite a few of the economists that I’ve been speaking to seem to believe that the recovery is going to have sort of a W shape and that we’re only at the bottom of the first V and that there’s going to be more pain to come. What’s your view on that? Would you agree?

Michael Hudson: Yes, I would. I don’t see how there can be a serious long term recovery when the volume of debt is as high as it is. In the United States and other countries, although the residential real estate crash has happened, the commercial real estate crash has not yet happened. Here in New York, the largest residential real estate operation in the country is facing bankruptcy – Stuyvesant Town and Peter Cooper Village residential complex. The largest US commercial real estate firms are going under. And walking down Oxford Street in London the other day the big streets have vacancy signs, vacant stores that used to be bustling and this is going to lead to commercial property defaults in many countries – Iceland and Latvia I’ve been in – people are having to pay so much more money as their mortgages escalate that they don’t have enough money to buy goods and services. If you pay the creditor the money you owe on debt, you don’t have this available for spending on the market, so markets are going to shrink here and as markets shrink, stores pull out of malls and, certainly in the United States, when one big store pulls out of a mall all the other stores have the right to stop their leases and pull out.

So, what we see is a really serious depression continuing to spread and the only reason the stock market has gone up is because the government has given $US13 trillion of giveaway money to the large banks. Now, if you give $US13 trillion to the banks, obviously the net worth of the bank stocks is going to go up by $US13 trillion and there’s going to be a recovery. But this isn’t the economy, this is the stock market.

IO: But then if you’re talking about a stock market recovery that’s been inflated by a stimulus, some might say artificially because the core value of the rest of the market hasn’t risen, then it’s not really a recovery, is it?

MH: That’s right. That’s right and I was at a monetary conference in Chicago over the weekend and economists were talking about a jobless recovery. Well, that’s sounds like an oxymoron; if it’s a jobless recovery, how can you call it a recovery? If markets are shrinking and bankruptcy rates are rising and people are further and further behind on their mortgage, that’s not a recovery.

Read the rest of the interview at Business Spectator